Country Analysis: Cote d'Ivoire

Jan 08, 2003 01:00 AM

Natural gas reserves and excess electricity generating capacity could lead to Cote d'Ivoire becoming a significant
regional energy supplier in coming years. Recent offshore discoveries in the Gulf of Guinea, including natural gas
finds in its territorial waters, make Cote d'Ivoire a leading area for hydrocarbon exploration in sub-Saharan
Africa.
Information contained in this report is the best available as of December 2002 and can change.

Cote d'Ivoire is currently in a state of political upheaval, following a failed coup attempt in September 2002.
Laurent Gbagbo is still president, although his government controls only the southern half of the country. In 2000,
Gbagbo defeated General Robert Guei in a controversial election that saw candidates from Cote d'Ivoire's two main
parties -- Cote d'Ivoire Democratic Party (PDCI) and Rally of the Republicans (RDR) -- excluded from the race. Guei
had assumed the presidency following the Christmas Eve 1999 coup that toppled President Henri Konan Bedie.
Although peace had been restored for two years after Gbagbo's election, violence erupted in September 2002 during a
military coup that ultimately failed. Since then, the rebel group Patriotic Movement for Cote d'Ivoire (MPCI) has
taken over cities in the northern half of the country, while a second group has taken over cities in the west, where
many of the nation's cocoa plantations are located. So far there is no sign that oil production has been affected by
the turmoil.

Cote d'Ivoire's economy is heavily reliant on agriculture (primarily cocoa, coffee and timber. which accounts for
approximately 40 % of Cote d'Ivoire's gross domestic product (GDP) and approximately 70 % of the total export
earnings. The country's real GDP shrank by 0.9 % in 2001, due to low cocoa prices, but was expected to increase by
3.5 % in 2002.
Inflation declined from 4.3 % in 2001 to an estimated 3.0 % in 2002. Since 1990, the government of Cote d'Ivoire
(GOC) has privatised 44 of the 61 entities it had scheduled for privatisation. In 1990, the GOC privatised the
management of the Compagnie Electricite Ivoirienne (CIE), the state electric utility. Other enterprises scheduled for
privatisation include the state's portion of the Societe Ivoirienne Raffinage (SIR) oil refinery, and segments of
Petrolieres de la Cote d'Ivoire (Petroci), the national oil company.

Between 1999 and 2002, the World Bank did not provide any budgetary assistance to Cote d'Ivoire, citing the country's
poor progress in economic management and governance. Although cocoa and coffee production increased, secondary sector
industries, such as telecommunications, mechanical and electrical industries, textiles, garments, and public works
all experienced negative growth.
In January 2002, Cote d'Ivoire cleared its arrears with the World Bank, while the country's successful economic
performance led to a staff-monitored program (SMP) and later to the approval of a Poverty Reduction and Growth
Facilty (PRGF) by the International Monetary Fund (IMF). The nation's Poverty Reduction Strategy Paper was due to be
finalized in December 2002, although it may be delayed due to political and economic problems stemming from the
failed coup attempt in September 2002 and the violence that has followed.

Cote d'Ivoire is an important country in West Africa. It is the leading member (accounting for 41 % of the group's
combined GDP) of the West African Economic and Monetary Union (UEMOA). UEMOA is composed of eight West African states
(Benin, Burkina Faso, Cote d'Ivoire, Guinea Bissau, Mali, Niger, Senegal and Togo) that share the same currency (the
CFA franc).
Cote d'Ivoire is also a member of the 16-nation Economic Community of West African States (ECOWAS). In September
1998, the Abidjan Stock Exchange was replaced by the Bourse Regionale des Valeurs Mobilieres (BRVM), a regional stock
exchange. The BRVM serves as the regional exchange for the member nations of the UEMOA.

Oil
Cote d'Ivoire contains an estimated 100 mm barrels of recoverable oil reserves, with offshore reserves first
discovered in the 1970's. The national oil company, Petroci, was established in 1975. Petroci was restructured in
1998 and four new entities were created: Petroci Holding, a fully state-owned company that is responsible for the
state's portfolio management in the oil sector and the three subsidiaries; Petroci Exploration-Production,
responsible for upstream hydrocarbon activities; Petroci-Gaz, responsible for development of the gas sector; and
Petroci Industries-Services, responsible for all other related services. Up to 49 % interest in the three
subsidiaries is available to private sector investors.
In June 2002, Calgary-based Canadian Natural Resources (CNR), through its wholly-owned subsidiary Ranger Oil Cote
d'Ivoire, signed a production-sharing contract (PSC) for the CI-400 Block. Block CI-400 is comprised of parts of two
other blocks, and is located in deep waters of up to 2,000 meters. CNR also holds interests in several other offshore
blocks, including a 58.67 % interest and the role of operator in the PSC for Block CI-26, which contains the
previously abandoned Espoir field.

CNR's partners on CI-26 are Ireland's Tullow Oil (21.33 %) and Petroci (20 %). Re-development of the Espoir field,
which was closed down in 1988 due to high production costs, has been estimated at $ 265 mm. The field includes two
unmanned wellhead platforms with hydrocarbon processing on a Floating, Production, Storage and Offloading (FPSO)
vessel. The FPSO has crude oil production capacity of 40,000 bpd and water injection capacity of 60,000 bpd.
Espoir's oil production is exported by shuttle tanker, while the natural gas is piped to shore where it is used to
generate electricity. First production occurred in January 2002, and the field has a life expectancy of 20-25 years.
Initial production began at 12,000 bpd of oil and 34 mm cfpd of natural gas and is expected to peak at 28,000 bpd of
oil and 35 mm cfpd of natural gas. In March 2002, the new FPSO, Espoir Ivoirien, tested successfully and began
production. The FPSO is contracted to produce for an initial ten-year term, with ten one-year renewal options after
that. Espoir's recoverable reserves are estimated at 93 mm barrels of oil and 180 bn cf of gas.

CNR operates Block CI-40 with a 61 % interest, and is joined by Svenska Petroleum (29 %) and Petroci (10 %). In March
2001, CNR announced a discovery on Block CI-40, Cote d'Ivoire's first deepwater oil find. The Baobab discovery had a
flow rate of 6,700 bpd of heavy (22 degrees-23 degrees API) oil and the well is expected to come online by 2005. A
second successful well was completed in February 2002 and tested at a rate of 10,000 bpd. Block CI-40 lies 5 miles (8
km) south of the CNR-operated Espoir field and is now estimated to have around 150 mm barrels of recoverable oil
reserves.
US-based Ocean Energy (Ocean) operates the Lion and Panthere fields on Block CI-11. Current production from the block
is 20,000 bpd of oil and nearly 70 mm cfpd of natural gas. Ocean's partners on Block CI-11 are Petroci, PlusPetrol of
Argentina, and International Finance Corporation. Ocean has continued development work on Block CI-11 and is now
extracting oil from the Lion A5 deep-sea oil well. Recoverable reserves on Block CI-11 are estimated to be 210 mm
barrels of oil and 495 bn cf of natural gas.

Ocean holds interests (ranging from 35 %-80 %) in several other blocks in Cote d'Ivoire. Development on offshore
block CI-01, where several small fields have been discovered, is continuing. Ocean is the operator of that block with
an 80 % interest. Although primarily natural gas discoveries have been made so far, the Gazelle field has recoverable
oil reserves estimated at 8 mm barrels. Ocean is the majority holder on Blocks CI-02, CI-12 and CI-104. Ocean holds a
35 % interest and is the operator on Cote d'Ivoire's first deep-water offshore block, CI-105. Ocean's partners are
Shell (55 %) and Petroci (10 %).
The UK-based Dana Petroleum has an exploration agreement with Cote d'Ivoire forBlock CI-100, which is located
directly west of acreage held by Dana in Ghana. Dana made an oil discovery on the Ghanaian block in March 2000, and
hopes that the oil-bearing structures continue into Ivorian waters. CI-100 is adjacent Block CI-01 where hydrocarbon
discoveries were also made.

Refining and downstream oil activities
Cote d'Ivoire's refining facilities are composed of the 65,200-bpd SIR refinery and an adjacent 10,000-bpd asphalt
plant (Societe Multinationale des Bitumes-SMB) in Abidjan. An oil pipeline connects the SIR refinery to the Lion and
Panthere fields. The refinery also receives crude oil from Nigeria for refining. SIR is scheduled to be almost fully
privatised by the end of 2003, after several long delays due to political turmoil. The state currently owns
approximately 47 % of SIR, and expects to retain a 10 % interest after privatisation.
Other shareholders in SIR are: TotalFinaElf (25.3 %), Shell (10.3 %), ExxonMobil (8.1 %), the government of Burkina
Faso (5.4 %), ChevronTexaco (3.7 %) and the GOC (1.5 %). The GOC's interest in SMB also has been scheduled for
privatisation. SMB's industry partners are SIR (53 %), Petroci (20 %) and Shell (6 %). An additional 21 % is held
privately (SMB stock is traded on the BRVM).

A petroleum products depot adjacent to SIR stores petroleum products for domestic use as well as for export to other
countries in the West African region. The depot, owned by the Societe de Gestion des Stocks Petroliers de Cote
d'Ivoire (Gestoci) supplies products to Mali, Burkina Faso, Niger and Chad. Nigeria has received shipments of refined
products from Cote d'Ivoire to help ease fuel shortages created by problems with its refineries. Gestoci operates
fuel depots in Bouake and Yamoussoukro.
Gestoci, currently joint-owned by the GOC and the petroleum marketers, is set to be restructured. The plan calls for
the GOC to have its stake in Gestoci reduced to 34 %. The GOC anticipates that refinery expansion coupled with
upgrades to Gestoci's Abidjan storage facilities will transform the country into the "Rotterdam of Africa", and make
Cote d'Ivoire the main supplier of refined products on Africa's Atlantic seaboard. A products pipeline from Abidjan
to Bouake is being considered.
Currently, products are shipped by rail and truck to the Bouake depot. The line, if constructed, may be extended to
Burkina Faso, Guinea and Mali. Several foreign oil companies (and one local firm, PetroIvoire) are involved in the
distribution and marketing of refined products in Cote d'Ivoire. ENI-Agip, ExxonMobil, ChevronTexaco, TotalFinaElf
and Shell control over 90 % of the downstream retail sector.

Natural gas & LPG
Natural gas reserves in Cote d'Ivoire, first discovered in the 1980's, recently have begun to be developed and
utilized. Current estimates of Cote d'Ivoire's recoverable natural gas reserves stand at 1.1 tcf. Over the next four
years, the GOC estimates that natural gas consumption will grow by 50 %. Natural gas production from Espoir is
expectedto average 35 mm cfpd over 20 years.
Ocean and its partners are currently producing natural gas from the Panthere field on Block CI-11. The natural gas is
transported to a site near Abidjan via pipeline, where it is used primarily to generate electricity. Future
industrial uses are planned. Ocean announced in April 1997 that it had signed a ten-year, take-or-pay agreement to
supply 170 bn cf of gas for electricity generation.
Under a take-or-pay agreement the buyer agrees to pay a certain price for a specified amount of gas, whether the
buyer actually uses (takes) the gas or not. The gas would be supplied from fields operated by Ocean located offshore
eastern Cote d'Ivoire in Block CI-01 (Kudu, Eland and Ibex fields) and Block CI-02 (Gazelle field).

The contract calls for initial deliveries, to begin in early 1999, of 30 mm cfpd for the first two years increasing
to 50 mm cfpd for the remainder of the contract. In April 1997, US-based Apache was granted a ten-year take-or-pay
contract for Block CI-27. Apache's partners on the field are Electricite de France (EDF), Petroci and Saur-Bouygues
(SAUR).
The offshore block, which contains the Phillips-discovered Foxtrot natural gas field, is primarily seen as having the
greatest potential as a gas producer. The original estimate of recoverable reserves on Block CI-27 included over 6 mm
barrels of condensate. Foxtrot is now the country's largest natural gas deposit, with an estimated 650 bn cf of
recoverable gas. The partners initiated production in June 1999.
In September 1999, Apache reduced and restructured its holdings on Block CI-27 by selling its stake in Foxtrot field
to Mondoil. Mondoil and SAUR assumed joint management of the operation. Apache continues to provide technical
services to the project, and it retains an interest through its participation in Mondoil (Apache is a shareholder in
Mondoil).

Cote d'Ivoire is poised to become a regional natural gas exporter. Negotiations between Cote d'Ivoire and Ghana to
adopt a Memorandum of Understanding (MoU) on the sale of gas began in 1997. In April 1999, an agreement was signed by
the governments of Cote d'Ivoire and Ghana with the UK government and Penspen for a feasibility study to build a gas
pipeline between Cote d'Ivoire and Ghana.
The UK Department of Trade and Industry has said it will share the cost of the study with Penspen. The pipeline would
run from Abidjan to Takoradi in Ghana, which is the location of a power plant currently fuelled by light oil.
Construction of the pipeline is estimated to take 15-18 months. The possibility of connecting the line to the
proposed West Africa Gas Pipeline (WAGP) is being studied.
The GOC estimates that domestic consumption of butane will more than double over the next five years. In 1998, Ocean
began operation of a LPG extraction plant it built near Abidjan. The facility produces 40,000 metric tpy of LPG and
gasoline, from 70 mm cfpd of natural gas feedstock. The GOC and Morocco signed an agreement in September 1998 for the
establishmentof an industrial plant in Cote d'Ivoire, Simgaz, to produce gas cylinders. Estimated production from the
plant is 350,000 gas cylinders per year. A pilot LPG-fuelled vehicle program has been proposed. Two filling and
conversion stations will be constructed in Abidjan.

Electricity
Cote d'Ivoire currently has installed electric generation capacity of 0.89 GW. Approximately three-fourths of Cote
d'Ivoire's installed generating capacity is hydroelectric, although hydroelectricity accounts for only 20 % of
generated electricity. The remaining 80 % is provided by thermal generating facilities powered primarily by oil. The
major hydroelectric facilities are: Ayame I, Ayame II, Buyo, Grah, Kossou and Taabo. An additional hydroelectric
facility at Soubre is being considered. A feasibility study for the facility, which would be constructed under the
build, own, operate transfer (BOOT) scheme, was delayed by Cote d'Ivoire's political upheavals. Construction of the
facility will take six to ten years.

Cote d'Ivoire is a leading proponent of the development of the West African Power Pool (WAPP). The WAPP was formed by
an agreement between ECOWAS Energy Ministers in November 1999. Although the formal structure and operational
agreements for the pool have yet to be determined, it is envisioned that the WAPP will interconnect the power
networks of all the mainland ECOWAS nations.
Cote d'Ivoire is currently tied to Ghana, Togo and Benin through one interconnection, and a link to Burkina Faso is
currently under construction as well. Additional connections to Mali and Guinea are being studied. At a summit in
Ghana in April 2002, it was announced that the ambitious project still needs to secure at least $ 10 bn in financing
over the next fifteen years if the project is to be completed.
It is hoped that most of the funding will come form the New Partnership for African Development (NEPAD). The US
Federal Energy Regulatory Commission (FERC) also signed a deal that links the Indiana Public Utilities Regulatory
Commission to the WAPP project.

A new thermal power plant is being built at Azito outside of Abidjan by a consortium named Azitoenergie, which
includes: Swiss-based Asea Brown Boveri (ABB), Industrial Promotion Services (IPS) -- an affiliate of the Aga Khan
Fund for Economic Development -- and EDF. The plan called for a $ 225 mm, 420-MW facility, with operation of the
first 144-MW phase beginning in early 1999.
Construction of the plant began in the last quarter of 1997. The first phase of the Azito power plant was inaugurated
on January 23, 1999. A second, 144-MW natural gas turbine was commissioned in February 2000. A steam-powered turbine
and two recovery boilers, which will transform the facility into the combined-cycle format, will be added to boost
the facility's capacity to the planned 420 MW.

The project has received financing from the International Finance Corporation (IFC), part of the World Bank group,
announced that it had entered into a 14-year, $ 32 mm interest rate swap with the Azito project. The agreement
followed the IFC's earlier $ 60 mm loan to the project. The Commonwealth Development Corporation (CDC) and the AfDB
also provided financing for the Azito project.
CIE handles the management of the government-owned generation facilities as well as transmission and distribution of
electricity in Cote d'Ivoire. SAUR and EdF are the majority owners of CIE (51 % share). Other investors in CIE
included the GOC (20 %) and private and employee investors (29 %). CIE has nearly doubled the number of its customers
in the ten years following its privatisation. The number of customers has increased from 400,000 (in 1991) to 750,000
(as of January 2001).

Status in climate change negotiations: Non-Annex I country under the United Nations Framework Convention on Climate
Change (ratified November 29th, 1994). Not a signatory to the Kyoto Protocol.
Major environmental issues: Deforestation (most of the country's forests, once the largest in West Africa, have been
cleared by the timber industry); water pollution from sewage and industrial and agricultural effluents
Major international environmental agreements: A party to Conventions on Biodiversity, Climate Change,
Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Marine Dumping, Nuclear Test Ban, Ozone Layer
Protection, Ship Pollution, Tropical Timber 83, Tropical Timber 94 and Wetlands

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal,
solar and wind electric power.
The renewable energy consumptionstatistic is based on International Energy Agency (IEA) data and includes hydropower,
solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal
wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data
**GDP based on EIA International Energy Annual 2000

The International Affairs Institute (IAI) and OCP Policy Center recently launched a new book: The Future of Natural Gas. Markets and Geopolitics.

The book is an in-depth analysis of some of the fastest moving gas markets, attempting to define the trends of a resource that will have a decisive role in shaping the global economy and modelling the geopolitical dynamics in the next decades.

Some of the top scholars in the energy sector have contributed to this volume such as Gonzalo Escribano, Director Energy and Climate Change Programme, Elcano Royal Institute, Madrid, Coby van der Linde, Director Clingendael International Energy Programme, The Hague and Houda Ben Jannet Allal, General Director Observatoire Méditerranéen de l’Energie (OME), Paris.

For only €32.50 you have your own copy of The Future of Natural Gas. Markets and Geopolitics. Click here to order now!